Cryptocurrency is one of the major buzzwords in the financial world at the minute, promising a new way to think about money, transactions and investment. But what exactly is it, and why has it captured the imagination of so many?
Learn the cryptocurrency basics in our handy guide for beginners.
What is cryptocurrency?
Cryptocurrency is a digital form of currency that relies on cryptography for security. Unlike traditional currencies like pounds or dollars, they operate on a technology called blockchain. This is a decentralised system that records all transactions across a network of computers.
The first cryptocurrency was Bitcoin, created in 2009 by an unknown individual or group using the pseudonym Satoshi Nakamoto. Since then, thousands have emerged, including the likes of Ethereum and Dogecoin, each with unique features and uses.
Why is cryptocurrency so popular?
Firstly, the decentralised nature of cryptocurrencies offers an alternative to traditional financial systems, making them appealing to those who distrust banks and governments. The anonymity offered also makes them attractive for transactions where privacy is valued.
The potential for high returns on investment has also attracted many investors to the market, especially during periods when the value of certain cryptocurrencies skyrockets. Some have boomed and bust, but others, such as Bitcoin, have largely maintained their value or continued to grow.
Reasons to invest in cryptocurrency
The major reason to start investing in crypto is the potential returns. While the market can be highly volatile, those original investors in early cryptocurrencies have seen astronomical gains. You might not be able to match them, but there are gains to be had.
Investing in crypto may also act as a hedge against inflation, particularly in times of economic uncertainty. Disconnected from traditional economic systems, cryptocurrency can thrive while financial institutions and banks suffer.
How to start investing in cryptocurrency
Investing in cryptocurrency can be relatively straightforward. You’ll need to choose a crypto trading platform where you can buy, sell and hold your assets. Simply create an account, complete any necessary identity verification and deposit funds using your preferred method.
Next, choose the cryptocurrency you want to invest in. We recommend starting with a well-known and established currency like Bitcoin or Ethereum before exploring more niche options. Decide how much you’re willing to invest and make your purchase.
How to invest safely
Any form of investment requires caution. The crypto market is highly volatile and prices can fluctuate dramatically in a short period. Only invest what you can afford to lose and diversify your investments to mitigate risk.
Always be vigilant against scams and phishing attacks. Where there is money, there is usually someone trying to scam you out of it. Don’t hesitate to seek advice from a financial expert if you’re unsure about your decisions.